2024 (5) TMI 544 - AAR - GST

Marketing consultant services to foreign universities qualify as export under Section 2(6) IGST Act when paid in foreign exchange

AAR Telangana ruled that marketing/recruitment/referral consultant services provided by applicant to foreign universities on principal-to-principal basis ... Intermediary - Principal-to-principal supply - Service on own account - Export of services - Place of supply - location of recipient - Recipient - Convertible foreign exchange requirement for exportIntermediary - Principal-to-principal supply - Service on own account - Recipient - Activity of providing marketing/recruitment/referral services by the Applicant to foreign colleges/universities is an intermediary or an independent service - HELD THAT: - The authority examined the contractual relationship and factual matrix and found that the applicant has privity of contract only with foreign colleges/universities, acts as an independent contractor providing marketing/recruitment/referral services, and has no contractual relationship with the prospective students. The definition of intermediary requires arrangement or facilitation of a main supply between two principals and an ancillary supply by the facilitator; it excludes a person who supplies the main service on his own account. The applicant neither arranges or facilitates the educational service between the foreign college and the student nor performs a subsidiary agent/broker role; instead it supplies its own main service to the foreign colleges/universities on a principal-to-principal basis. Reliance was placed on CBIC guidance and precedents holding that a provider who supplies the main service on its own account cannot be an intermediary. Accordingly, the necessary conditions for characterisation as an intermediary under Section 2(13) IGST are not satisfied by the applicant. [Paras 7]Applicant is not an intermediary; the services are independent marketing/recruitment/referral services supplied on a principal-to-principal basis to foreign colleges/universities.Export of services - Place of supply - location of recipient - Convertible foreign exchange requirement for export - Whether the Applicant's activity qualifies as export of services - HELD THAT: - Applying the statutory test for export of services (supplier located in India; recipient located outside India; place of supply outside India; payment received in convertible foreign exchange; and supplier and recipient not merely establishments of a distinct person), the authority held that the recipient of the applicant's services is the foreign college/university located outside India and that the place of supply is the location of that recipient. The parties are not establishments of a distinct person. Therefore, subject to the condition that payment is received in convertible foreign exchange, the applicant's marketing/recruitment/referral services to foreign colleges/universities qualify as export of services under Section 2(6) IGST. [Paras 7]Services qualify as export of services under Section 2(6) IGST provided payment is received in convertible foreign exchange and other statutory conditions are met.Final Conclusion: The Authority ruled that the applicant is not an intermediary but an independent supplier of marketing/recruitment/referral services to foreign colleges/universities, and that such services qualify as export of services under Section 2(6) IGST provided payments are received in convertible foreign exchange. Issues Involved:1. Qualification as 'intermediary' u/s 2(13) of the Integrated Goods and Services Tax Act, 2017.2. Liability to GST or qualification as 'export of services' u/s 2(6) of the Integrated Goods and Services Tax Act, 2017.Summary of Judgment:Issue 1: Qualification as 'Intermediary'The Authority examined whether the Applicant's activity of providing services of 'Marketing/Recruitment/Referral Consultant' to foreign universities/colleges on a principal-to-principal basis would qualify as an 'intermediary' u/s 2(13) of the IGST Act. The Applicant has a 'privity of contract' with foreign colleges and universities and works as an independent contractor, receiving referral income or commission based on successful admissions. The Applicant does not have any contractual relationship with the prospective students and does not facilitate the supply of services between the foreign colleges/universities and the students. The Authority relied on various legal precedents and CBIC Circular No. 159/15/2021-GST to conclude that the Applicant is not an 'intermediary' as it provides services on a principal-to-principal basis without facilitating a service between two persons. Therefore, the Applicant should not be considered as an 'intermediary' for the purpose of Section 2(13) of the IGST Act.Issue 2: Liability to GST or Qualification as 'Export of Services'The Authority examined whether the Applicant's activity would be liable to GST or would qualify as 'export of services' u/s 2(6) of the IGST Act. The Applicant is located in India, and the recipient of services (foreign colleges/universities) is located outside India. The place of supply of the services is determined to be the location of the recipient, which is outside India. Since the Applicant and the foreign colleges/universities are not related entities, the activity qualifies as 'export of services' provided the payments are received in convertible foreign exchange. Therefore, the activity of the Applicant for foreign colleges and universities should qualify as 'export of services' in terms of Section 2(6) of the IGST Act.Ruling:1. The Applicant should not be considered as an 'intermediary' for the purpose of Section 2(13) of the IGST Act.2. The activity of the Applicant for foreign colleges and universities should qualify as 'export of services' in terms of Section 2(6) of the IGST Act, provided the payments are received in convertible foreign exchange.